Companies globally undertake multiple strategic choices in order to ascertain their competitive position within the industry (Ortega, 2010). With globalization and technological advent scope of operation for corporations have expanded beyond national boundaries. Such prospects have also exposed companies to ascertain their competitive positions in a strategically defined manner taking into consideration country-related, industry-related and market related parameters. There are a number of strategic development tools, which a company can make use off in the market. The scope of current discussion pertains to discussing PESTLE, Porter’s five forces, Porter’s Generic strategy and Ansoff’s matrix analysis.
Competitive strategic models aid companies to make their strategic choices decisively. Companies prior to operating within a country needs to ascertain situation prevailing within the country. Therefore, conducting a macro-environmental external analysis becomes crucial, which can be undertaken by way of PESTLE analysis. PESTLE is an abbreviated form for political, economic, social, technological, legal and environmental analysis (Ho, 2014). Political analysis incorporates the bureaucratic structure, political influences that are impacted on the business within the country. As for example, political interference in Australia on businesses is considered to be positive. Economic factors constitutes, economic situation, inflation, market condition, currency stability within a country. As for example Greece is under economic turmoil hence can be understood to be not suitable for businesses. Social factors include age of workable population, social condition in general towards product acceptance and so on. Technological factors include advent of technology, levels of technology prevailing within the country. Now it specially implies to ecommerce platforms present, which indicates capability of a country. Legal factors indicate labour laws, tax laws and other specific laws as can be implemented to businesses. Environmental factors include laws related to emissions, recycling and other environmental norms and consciousness. A mining industry within Australia is expected to have minimum political, economic and social or technological influence. However, it will suffer from environmental and legal conditions prevalent within the country. It needs to abide by emission laws and polluting standards for operating without hindrance.
Figure 1: Competitive Strategy
The Porter’s Five Forces of completion is an appropriate model for evaluating industry related condition (E. Dobbs, 2014). It has five prominent forces or factors that affect a company’s operation within an industry, namely bargaining power of buyers, bargaining power of suppliers, industry rivalry, threat from substitute product and threat from new entrant. As the terms suggest in case bargaining power of buyers is high in an industry, then a firm is likely to experience pressure from it. Bargaining power of suppliers imposes critical ability on the firm to decide on its prices, quality and capability to market its products. It constitutes an integral component as an industry with high bargaining power of suppliers is most likely to experience pressure from performance from it. Threat from substitute products reflects an industry where substitute product is readily available is more likely to be more competitive. Threat from new entrant reflects the ease with which a firm might be able to enter and operate within an industry. Industry rivalry factor reflects the presence of competing forces within the industry. As form example, a retail company such as Coles in Australia is more likely to face high bargaining power from buyers due to presence of large number of retail stores. Less bargaining power from suppliers due to its large size and number of supplier present. High industry rivalry due to presence of large number of competitive firms. High threat from substitute products, as retail products generally has alternatives. High threat from new entrant due to ease of entering retail markets in Australia.
Porter’s Generic Strategies provides a strategic model for a company within the industry to select its mode of operation. According to Porter, there are prevalent three distinct strategies that a firm might select from namely, low cost strategy, differentiation strategy and focus strategy (Tanwar, 2013). A firm might choose to operate its product at low cost in case the market is highly competitive and every competitor is competing on cost. At another instance, a firm might select to operate on differentiation strategy, by establishing its product differently compared to other existing products in the market. In a focus strategy a firm generally selects to operate in a selected area such as a town or city and market its products. This strategy is generally adopted by companies in order to concentrate and gain market share over a place or over a product. A focus strategy can be based upon low cost focus or differentiation based focus, where a firm conducts this model on a particular area. An ideal example of Porter’s Generic Strategy industry application constitutes CMobile low cost SIM only mobile plans. The Company aims at gaining market share through this strategy of low cost by providing consumers with Vodafone 4G mobiles fast data plans with telephone coverage. Low cost strategy works well for new entrant in the market and allows it to establish steady foothold.
A popular strategic model constitutes the ANSOFF matrix. In the Ansoff’s matrix, a firm can select from a varied types of strategies in order to increase its market or products (Elmes & Barry, 2017). There are four prominent strategies, which are available to a firm in Ansoff’s matrix, they constitutes market penetration, market development, product development and diversification strategy. A company has the liberty to select from any of the four strategies in Ansoff’s such that it is able to increase its market share. A firm might select market penetration when it is present in a market but has relatively low market share. A company selects market development strategy in case it wants its product to be established and accepted in a market. In product development strategy for example Apple Company’s products, the firm aims at developing new products to expand its brand name. Apple has launched several iPhones and other products as well. In a diversification strategy the firm might select to expand within a market along with developing a new product. Diversification strategy is used when entering a new market with a new product altogether. An ideal example of this includes Tesco UK entering banking and finance sector in European countries. An Ansoff’s strategic model allows expansion of the present brand name and brand recognition, either within the same market or in other markets.
Evaluation of relevant strategic models reflects their relevant importance to companies. While only a few models have been discussed here due to limitation of scope, companies generally makes use of a number of strategic models and then applies them to business for arriving at suitable competitive strategies related to their businesses. While at one time there might be used a particular model as for example Porter’s generic strategy for deciding on a particular product, at other times Ansoff’s matrix might be used. Often all strategies are used together to arrive at conclusive decision related to products of a company.
Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), pp.32-45.
Elmes, M. and Barry, D., 2017. Strategy retold: Toward a narrative view of strategic discourse. In The Aesthetic Turn in Management (pp. 39-62). Routledge
Ho, J.K.K., 2014. Formulation of a systemic PEST analysis for strategic analysis. European academic research, 2(5), pp.6478-6492.
Ortega, M.J.R., 2010. Competitive strategies and firm performance: Technological capabilities' moderating roles. Journal of Business Research, 63(12), pp.1273-1281.
Tanwar, R., 2013. Porter’s generic competitive strategies. Journal of business and management, 15(1), pp.11-17.